As A Borrower, Either Millennial, Gen-Xer or Baby-Boomer Be

There are three distinct stages in a homeowner’s life. Let’s call them Millennial, Gen-X, and Baby-boomer, and while these terms imply distinct generations you can think of them as a series of financial stages that lead one to another, ascending the ladder of wealth.

Arguably, homeownership proceeds in stages because it is all about building and managing wealth; wealth itself is about having the lifestyle you have earned from the accumulated rewards of hard work. In the United States of America, owning your home is still one of the most significant factors associated with financial independence and membership in the middle class.

Financing for The Millennial Generation

If you are at the leading edge of the millennial generation, you are likely to be finished with school and starting to build a career. Now that you have gotten the travel bug out of your system paid down the majority of your student loans, and your career is on track, you might start to look around and get a home of your own.

As a person with just starting out, you might wonder if you are better off renting or buying. Once you decide that ownership is the right choice, you will have to start taking your credit history seriously and make an effort to get qualified for your first home loan.

Fortunately, first-time homeowners are reasonably well served by programs intended to get you into your first home. If you don’t have the savings to make a deposit of twenty percent or more, an FHA loan will facilitate making a small down payment, but that will add costs to your borrowing, this is an institution that has helped generations of Americans buy their first homes. If you are a veteran of the United States military, you might qualify for a Veterans Administration loan with even more generous terms.

Mid-life Gen-X Financing Options

You have bought that first home; you have paid down the loan balance and maybe the house of condominium is looking a little too small now, you have a career that is expanding and a two-income home. If you made it through the last decade with your assets intact you are in a good position to move up, you might decide to move up to a luxury home in an exclusive neighborhood.

With a low level of debt relative to the equity you hold in your assets, you can qualify for a jumbo loan unrestricted by the limits imposed on conforming loans, loans that fall within the limits set by Federal regulators on mortgages to conform to FHA and other government-backed lending programs.

Once your big move is behind you, maybe it is time to start expanding your assets. Do you dream of buying a vacation home or a rental property as an investment? Buying a second home or a rental unit could be a convenient and enjoyable way to increase your wealth.

Baby-Boomer Asset Consolidation Financing

You are in the stage of life when you want to consolidate your assets and downsize and focus in preparation for retirement. You may be wondering about how to get more out of your investment properties, reinvesting your gains or just converting to cash. These are questions that you need to work with your financial advisors and your family. Borrowing against your assets may not be the best choice if you have built up a large nest egg. However, holding a moderate level of debt could be financially efficient if you can take advantage of the tax deductions relating to interest.

All three stages have variations and creative possibilities and if you have a plan you can make each of the first two stages flow on to the third. Real estate finance still offers the American public the opportunity of ownership and advancement; it can bring a more comfortable and exciting lifestyle for those who are motivated to take advantage of it.

There are at least as many ways to finance a home purchase as there are circumstances in which to buy your home. Help from a friend or family member is one way to get that first home when it would otherwise be just out of reach. Co-signing the loan for a beloved family member is a way to help them to become homeowners if you are comfortable with the responsibilities that go with it.

Co-signers help when the borrower is young and does not yet have credit or has a short credit history. Alternatively, the borrower might be living on a modest income that would not otherwise enable them to secure financing unassisted.

The Warm And Fuzzy Part: Co-Signer Pros

If you are financially well established, with all of the assets and good credit that you could desire, you may be looking around to help the younger and less affluent members of your family. You will have the emotionally rewarding feeling of sponsoring your family. The changes in the economy over the past several decades have made it more difficult for young people to get established. Student debt and economic turmoil have made starting out in life more difficult, and it is rewarding for senior family members to help out.

And Now For The Scary Part: Co-Signer Cons

Co-signing a loan for a relative or friend is not without risks. As long as your name is on the title you are going to be sharing the risk, which has the real possibility of generating disagreements and hostility between the borrower and you; it is the sort of thing that can destroy family relationships. As a co-signer, you will be listed on the property title, and this will give you responsibilities but not many rights.

In legal terms, the cost can be very high for you as the co-signer if the borrower defaults. The lender will come after you first, it will damage your credit, you will most likely not have any rights to take possession of the property and, depending on your state laws, any deficiency judgments that result from a foreclosure sale will be against you as well as the borrower. The lesson here is that, if you are sure, get sound legal advice on the laws of your state before make your decision and sign anything.

Make It A Temporary Solution

If you are confident that your fledgling borrower is going to make the payments and build their credit and income, it is in your long-term interest if you can encourage them to refinance as soon as possible. If their credit and paychecks improve, their equity has increased sufficiently, or local real estate values rise, they will have some strong incentives to refinance based on their independent financial standing.

Your borrower should appreciate the significance of this help for the generous act that it is and co-signers need to get comprehensive legal advice before agreeing to anything. Co-signing for a home loan is something that needs to be weighed very carefully but, if no other less extreme options are available, it can be one way for a family to pass on financial opportunities to the next generation.

Dreaming The Dream

Ironically the key to building your own home from scratch is having the right professional support to put the whole process together and to ensure that the process goes smoothly from start to finish.

The thought of building your own home is extremely appealing to homeowners. If you could live in a unique house that was designed to your exact personal requirements, why would you not? Who would not want that? It is a real aspirational dream to start from scratch and come up with a house unlike any other.

Building your own home is an epic challenge because of the costs and complexities involved. But after it is completed, a successfully self-built home that stands out with charm and character is likely to become a landmark and icon of the community in future decades. This is also because the owner made their mark on society prior to construction.

Listing The Build Your Own Home Resources

As always, real estate and home ownership is about location. So the first element of the project will always be the finding of a suitable plot of land. If you already have that then you have made a significant first step to committing to a long and elaborate journey.

Your land will need to have the right permissions to construct the type of building that you want. This process could be straightforward or frustratingly difficult depending on how inline your plans are with the surrounding properties and the community in which it is situated.

Bring In Professionals

You will start when you hire an architect or select a published building design that suits your needs. An architect can do much to help you organize the plan and will come up with a unique design for your site and your lifestyle. Many construction companies have off-the-shelf plans ready to go. The advantage here is that they will do the work and already have the bugs worked out. So, it could be a smoother ride through the process.

You will also need to have a plan for completing the project. This is not a design for your home but a roadmap to get through the process of doing all of the work to make it happen. This is critical because there is a sequence of events from clearing the land to connecting the utilities.

On a related note, you will need to decide if you are going to employ a builder to manage and supervise the project or if you are going to act as show-runner and manage the build yourself. Even if you do choose to self-build you will likely need to consult with a builder to make sure the details come out right.

The combinations and permutations of how you go about building your own home are almost limitless. Some of the things you need to be aware of are the steps in the project plan and follow how progress is going in relation to the plan. One of the most important issues you should be concerned with is costing. Even small cost overruns can add up over the life of a project. An alternative would be to work with a builder that provides a turnkey solution.

In Summary

Building your own home can be a fantastic adventure or a difficult long, drawn-out process. It is not for everybody. Most home seekers will be satisfied with the new homes offered by developers or the many choices of the existing home sales market.

If you decide to go the route of building your own home make certain that you do your research and find qualified professionals to support your objectives. If you get it right you will have a unique and remarkable home that is unlike any other in your neighborhood.

Is It Work Putting In A Bid And Doing The Work?

Choosing to invest in a fixer upper in a nice neighborhood may seem like a case of following your heart but it is in fact a math problem. You are going to want to spend less than the full market price and then put in some cash, construction loans or really, really hard work. Of course you will get the biggest discounts by using the best available combination of all of these.

Although construction and rehab prices will vary the real deciding factor is the variation in the price of land, which varies dramatically across the country. The more crowded areas and those that have the best weather may be pricier than the rest. Also the amount of money that is poured into an industry in a region can make a difference. This is evident in the so-called sunshine tax of Southern California, the tech driven super-high prices of San Francisco and the expensive urban centrality of Cities like New York or Miami.

Rehabilitation Heroics

The thing about buying the most run-down home in a neighborhood and improving it is that, even if the fact remains unspoken, you immediately become a community hero. There is serious automatic goodwill for you when you take on the local eyesore. Homeowners in a community are painfully aware of the run down foreclosures and derelict houses that are dragging down the character and value of their own homes.

In fact, if no other option emerges, some owners will form syndicates to rehabilitate blighted properties, if it will make a critical difference in the future prospects of their own homes. Abandoned houses attract wildlife and sinister uses by elements such as drug users and such. You will be doing the existing homeowners of your new community a huge favor to put in the work and the equity. It’s an investment that they are dreading to make themselves.

Doing The Fixer Upper Math

How do you price it? First, determine a conservative estimate of the likely full market value. At this point professional investors and house flippers will knock off around twenty percent as a profit margin that they want to make. For you as a private buyer, this discount is likely going to make getting in with hard work worthwhile.

Second, determine the cost of getting the property to full market value. This should be estimated on the high side to allow for hidden defects and unforeseen problems. You will be looking at a list of problems, and the materials and labor to put them right. Don’t forget the cost of professional fees and any cost of short-term borrowing. Then, subtract that from the full value. This will give you the price range in which to bid. If it turns out to be something that you can afford, work with your realtor to negotiate a deal.

Hard Work Might Just Pay Off

At the end of the day it’s about making your own personal dream affordable. That might mean getting you ensconced in the perfect neighborhood at a discount. If that is what works for you to create a happy home there is no reason to argue. The essential point is to be happy and cut some corners so that you can do it within your budget.

The Competitive Market Analysis

Why is it that the expression “appraisal” isn’t slung around by realtors the way that it used to be thirty years ago? Well, it turns out there’s a pretty solid reason. Appraisal has come to mean an official statement of price opinion. The alternative is the competitive market analysis given by your realtor or broker.

It is all about getting the right opinion of the price the market will support for a sale. Appraisal refers to an official opinion from a certified professional but it is still an opinion of price. It can be submitted on an application for home finance because the finance industry will trust it based on the fact that a licensed appraiser created it.

An experienced and worthy professional realtor will have a very good idea of prices. Even so, the opinion that they give is not usable for applications but they should have an accurate enough opinion to put a property on the market and have it sell. Or, as a buyer’s agent, calculate the right price to bid for a property without over-bidding.

Appraisal Means Authority

The distinction and split between appraisal and market analysis came about because of the savings and loan crisis of the 1980s. Since then there has been a clear difference in the usage of the terms.

So what is it that a realtor can do for you without calling in a certified appraiser? Quite a lot actually and it is one of the fundamental reasons that the profession is so valuable in all real estate transactions.

Your realtor should have enough experience to judge the market conditions in your community, whether you are selling out of it or buying into it. They should be able to give you accurate advice to complete the transaction at the highest and best value for a given property.

The Multiple Listing Service (MLS) to which they subscribe is the inside track on what is being sold in your area, for how much and when. There are websites that give you information about sales and listings such as Zillow and Trulia.com but the most comprehensive information is always within an MLS.

Websites do a great job of tracking public record information but your agent’s MLS will have access to the inner details about what is happening in the slice of the market that it covers. A realtor must understand the market beyond the obvious and that is the advantage that experience gives.

Different Stage Means Different Need

Word play and legalistic definitions aside your realtor has the knowledge and the support to give you the information to help you buy or sell your home. When it comes to official documents, yes you do need to have an opinion of value from a licensed appraiser. Otherwise, the wisdom of your experienced real estate professional should get you to the right value for your side of the real estate transaction.

It is an exciting time when you move in with a partner, one that should be the epitome of happiness. However, organizing cohabitation is more complicated in practice, especially if either one of you already owns the home and makes payments on a home loan. The question of whether you should refinance is a part of the bigger question about how you will share ownership and financial responsibilities in general.

The Hazards Of Taking Turns

Taking turns in paying for life’s necessities in cohabitation leads to two parts of one problem: One or both partners soon start to keep a tally of who has paid for what. The solution for this is creating one shared bank account from which all costs of living and shared expenses come with both partners making a predetermined monthly contribution based on a budget that you work out and review together. Like your bank account, you will find that sharing the home you occupy is a tricky proposition, dependent on your circumstances and your state’s real estate laws on shared ownership.

Cohabiting As Homeowners

When you commit to co-ownership, you need to have a clear understanding of each other’s financial position going into the relationship. Do you know your partner’s current credit situation? Deciding whether you should refinance your home with your partner comes as part of the process of deciding how you should share everything. It is something to settle before you start making final choices.

So, what do you do when one partner owns the home already? If the other can afford to match assets and equity and borrowing ability, then the simplest solution might be to refinance as equal partners, both bringing cash and financial clout to the shared home.

If there is an imbalance in assets, then it becomes more complicated and yet in the eyes of the law, both partners might be entitled to an equal share of the property. The solution could be a cohabitation agreement, very much like a wedding prenuptial agreement, a contract that declares the assets brought to the partnership by each side and which return to each partner, should the relationship end.

Getting On With Your Lives Together

Real estate is a concept that is defined very clearly in the laws of the land, and each state has its particular histories legal precedents and legislation. The more closely you study the subject, the more complicated it becomes and it has become a specialization in the law that captures entire careers and specialized law firms.

As unromantic as it might seem, getting legal advice before you commit to moving in together is a prudent course of action. However, homeownership is a part of life, and domestic partnerships are a reflection of legal ones. If you can get past the legal formalities and settle in, as many couples do, you can have the domestic bliss you are seeking with all the comforts of owning your home.

Americans who have actively served their country in all branches of the military and having left the service with anything other than a dishonorable discharge have access to a wide range of benefits from the Department of Veterans Affairs. Under the Veterans Administration (VA) this includes assistance in purchasing a home.

Great Terms On Home Loans For Veterans

The VA does not lend money for home purchase but instead provides a loan guaranty to qualifying veterans to buy homes on very affordable terms. The VA loan guaranty program was instituted as the end of WWII approached, and the agency was very aware of the coming waves of men and women returning to civilian life. The concept was to enable returning veterans to settle and have a home and a part in the American Dream, in recognition of the fact that they had risked sacrificing their lives on behalf of the nation.

What has evolved over the years is an excellent program that allows qualifying vets to buy homes without down payments. This program is a generous benefit but in practice, it suffers from a touch of bureaucracy and being poorly understood by some real estate professionals.

VA Loans Sometimes Cause Confusion

Lenders and realtors sometimes shy away from VA because they do not have enough information or experience with it in practice. In unsubsidized conventional lending, the borrower contributes a down payment of twenty percent or more. The VA entitlement subsidizes insurance on the portion the financing that would be covered by the down payment; this can be confusing to inexperienced lenders and agents.

The VA Loan Guaranty program sets no limit on lending, but it caps the deposit liability. VA Loans do not have a conforming loan limit per se, but for a no-down-payment VA loan the de facto lending limit is the same as Fannie Mae and Freddie Mac limits by county, but by adding cash as down payment you can increase the size of the loan. In all cases, you still have to qualify based on your credit and income just like conventional and FHA loans.

Appraisals for VA have a reputation for being rigorous, slow and conservative (meaning it might come in low). A low appraisal might prevent the sale unless the buyer pays the difference, which undermines the whole point of “no down payment.”

VA financing requires that an eligible property is within U.S. territories and is a completed structure, either new built or existing, not undeveloped land. If the home is a condominium, the complex also has to be approved for VA lending, which is not a given.

Something For Your Service

The potential roadblocks you might encounter are professionals reluctant to work with a VA loan, harsh appraisals and the need for condo approval. But these are not insurmountable challenges; a little persistence will go a long way when you are attempting to buy a home with a VA loan and no down payment. Approach the process as if you are hunting for a bargain and when you have your new home, you will find it is a bargain that you earned with your service.

How Do You Get A Credit Score?

The consumer finance tool known as your FICO Score came from its namesake, The Fair Isaac Co., in response to a need for financial institutions to have a mathematical snapshot of consumer financial health. For sixty years it has helped American financial services companies to judge the credit worthiness of individual customers and whether or not to extend credit.

Credit scoring has been instrumental in facilitating purchases, improving the probabilities that lenders recoup their investments; it has also given customers the lifestyles that bring joy and happiness while boosting the performance of the economy as a whole.

FICO Scores By The Numbers

The credit bureaus score consumers based on the Fair Isaac formula and the information they have compiled from reporting lenders. This score, ranging between 300 and 850, might vary slightly between agencies because they have differences on file. Not all credit-reporting businesses give information to all three services. However, the information is not likely to deviate significantly from one service to another.

Factors in scoring: Payment history, the length of your credit history, the number and type of accounts, and how many new accounts you have. It is important to note that when a lender views your credit report it has an adverse impact on your score! Ironically, too many hard inquiries are a bad thing when you are seeking the best lending terms. So limit your applications to only the ones that will give you offers you plan to accept.

Actions That Raise Your Credit Score

Higher is better in credit score calculation. A low score is not the same as no-score where you cannot get credit, but instead, it will indicate the terms that lenders will offer you. If you have a low credit score banks and mortgage companies will offer you more expensive terms. When you qualify for better loan terms, you will save many thousands of dollars over the term of your home loan.

Keep making payments on time – Missed payments stand out on your credit report like enormous red flags, and this reflects directly on your credit score. The regular and consistent payments you make are critical to increasing your score, and these financially healthy habits will be more important as your credit history gets longer.

Avoid applying too often – Start new credit accounts and inquiries as sparingly as possible, too many new accounts or hard inquiries drastically reduce the average age of your accounts, which drags your credit score down.

Use the credit you have – If you start new accounts, it is a negative mark but if you utilize the lines that you have it will help to establish a history that shows how you behave over time. Although there are many ways to go wrong and abuse your credit, not having any credit history will prevent you from getting approved altogether.

Pay down debt – Reducing your debts from your highest levels of borrowing will demonstrate to finance companies that you will act responsibly with their capital.

Look at alternative lending packages – If you have the cash, consider prepaying more points for a lower rate and put down a smaller deposit, this will help to keep your interest rate down.

If The Finance Deal Sounds Too Good, It Probably Is

Buying a home is a big undertaking and one that has implications for the decisions that you make today that could impact your wealth and lifestyle for years to come. You need to be extremely careful to get the financing right so that you can reap the benefits of a smart choice.

The financial services industry is gigantic and diverse; it accounted for $1.26 trillion worth of sales in 2014. While the majority of companies provide excellent service, there are a few that are unscrupulous, and in between there are those companies that maybe just push the hard-sell tactics too far. So let’s point out some of the selling tactics to look out for and take as signals to avoid particular real estate lending offers.

Watch Out For Deceptive Wording

“Low Fixed Rates” that are just ARM introductory periods – If the blurb says something along the lines of, “low fixed rate for the first five years,” that is a sure sign that the loan is an adjustable rate mortgage or ARM. While an adjustable rates are not necessarily bad, they can be worded deceptively and potentially leave the borrowers open to the risks associated with the terms and uncertainties at the time that the adjustment takes place.

“A great deal because it’s government backed!” – Really? Government programs, for example, Freddie Mac and Fannie Mae, “back” most loans that meet the conforming criteria by purchasing them as investments; such claims are misleading because they overstate the significance of that backing.

Refinancing Offers To Avoid

Unsolicited offers in return for information – In refinancing a home loan, it is always a safer policy to take the initiative. Do not respond to unsolicited offers that promise to find a great deal if you “just fill out a form.” The risk of getting scammed is just too high. The information that they ask you to give is exactly the type of information that identity thieves crave; you are better off just assuming that unsolicited refinance offers are scams.

Never pay fees up front – There is no good reason to pay a lender anything before closing. If they ask for payments up front, it is a sign that you need to go elsewhere for your refinance. Don’t do it, and don’t walk out, RUN!

Bonus Tip

Avoid prepayment penalties – How about your interest if you pay off the loan early? Who knows what will happen in the next five years? The pace of technological changes and politics are so volatile these days that you don’t want to be tied into some financial commitment, with a cash penalty as the only alternative. But this is what can happen with a home loan that has a prepayment penalty tying you in as part of the contract. Regardless of your present plans, always insist that your home loan has no prepayment penalties.

Information on what to avoid in real estate finance is not hard to find. A search of the Internet will return a list of the latest scams and scoundrels and how to avoid them. Researching the reviews of services on social sites, the Better Business Bureau and getting advice from trusted and disinterested parties is all part of the process of finding the right provider for your home loan.

Eighteen Months To A Down Payment

It is amazing how much the typical consumer spends on convenience items that they can substitute with a little effort. If you set a goal of buying your first home, there is a good chance you can get there in the next eighteen months by making some changes like avoiding the financial traps exemplified by the six following spending habits.

What Sort Of Down Payment?

If you finance with an FHA loan, you will need 3.5 percent of the sale price for the deposit and 1.5 percent for closing costs (usually included in the loan, but let’s be conservative here). So, 5 percent of a starter home that might be $100,000 to $300,000, depending where you live.

That means you need five to fifteen thousand dollars, which sounds daunting, right? But here is the thing: You might easily spend that much in eighteen months on things that you can cut from your spending. Even a single person might find $5,000 of savings in eighteen months (that’s just over $64 per week).

A married couple can easily economize to come up with an extra $64, $128 or even $192 per week by cutting down on all of the non-necessities the modern world want so badly to sell you.

Cut Out These Habits

Eating out daily – Make it a special treat for once a week and find recipes for easy-to-make home-cooked meals that you enjoy. Meal preparation is time-consuming, but if you cook for several days at once and refrigerate portions in single serving containers. You can multiply the benefit and maximize the savings by taking them to work or for hassle-free dining when you get home.

Growing credit card balances – Stop spending money on your credit cards, just stop, do it now! Lenders look at debt-to-income when considering loan applications, and they frown upon higher debt, so turn it around now and start reducing your balance.

Going to casinos – Gambling is taking money straight out of your pocket, the house always wins, and you will never own the house until you stop giving your money to casinos!

Premium cable packages – While it might hurt to forego the live game feeds and shows about dragons, ask yourself if that massive cable bill is worth not having homeownership in your future?

That gym membership you never use – Gyms sell hope more than anything else. If you have a monthly membership that you never use, save the money and get out and take part in some other free physical activity.

Those ten-dollars-a-month Internet services – How many accounts for audio books and streaming content do you have? Take a steely-eyed look at what nickel-and-dime services are soaking up your income and which ones are genuinely delivering value to your household.

Save Now And Enjoy The Rest Of Your Life

If you don’t already have the necessary means, then you are going to have to do a little work. Put these six habits to rest and you will be about eighteen months closer to making a life-changing purchase. It will be effort well spent that you appreciate most when you finally turn the key in the lock of your first home.